Barrage of insurance laws to flood industry from Q3

Irdai likely to implement these as early as December

The Insurance Regulatory and Development Authority of India (Irdai) is set to bring out a number of new rules to conform to the new insurance Act. These might be implemented from as early as December 2015.

The Insurance Laws (Amendment) Act 2015 has made fundamental changes in the way insurance is conceptualised, sold and bought. Among other areas, it will bring out regulations on claim rejection, expense management, and solvency ratio.

For speedier execution and finalisation of new norms, three committees on life, non-life and health have been constituted. These committees have members from the insurance sector who will deliberate and come up with appropriate recommendations in their report on these issues.

“Now that the regulatory body has all full-time members, it is ensuring all the new laws are brought out on time so that we have adequate time to adapt to the new norms,” said the chief executive officer of a large private life insurer.

However, there are divergent views on some areas such as expense management and claims rejection. For example, the new Act says no claim, even if fraudulent, can be rejected after three years. Insurers say that fraudsters will take advantage of these norms.

Similarly, a new compensation and incentive structure will be brought out for agents, which might impact the outgo from customer premiums. Insurers also don’t agree with the regulator’s view that fixed remuneration would reduce agent attrition.

According to sources the draft norms on agent commissions will be brought out in a few weeks.

IMPACT OF NEW NORMS ON POLICY HOLDERS

• No claim rejection after three years: After three years of a policy being in force, claims cannot be rejected under any circumstance. Hence, customers wouldn't have to wait for the claim to be approved
• Agent remuneration to be more balanced: Agent commission, deducted heavily from the first-year premium, will be more balanced towards second, third, and fourth year. More customer premium will go towards saving/investment component
• Solvency ratio higher for some products:  Since insurers would have to maintain higher capital for products such as group health, this would result in higher premiums

By December, the laws on Indian management and control of insurance companies will be finalised. This will decide how an Indian insurance firm will be run, the composition of its board and top management, and what are the rights given to the joint venture partners.

Several foreign joint venture partners had expressed their discontent on the restriction of their rights in board appointment and voting for strategic decisions. Insurers said the regulator would take a middle path to ensure the rights of both partners in an insurance venture were protected.